Jerry T. Stowell Country Futures Focus:Grains, Livestock Website: www.countryfutures.com E-mail: jstowell@kansas.net

COUNTRY FUTURES - June 29, 2009

COUNTRY COMMENTS BY JERRY STOWELL

CATTLE

By: Jerry Stowell

At 10:45 August LC are trading at 8300 up 60, while August Feeders are trading at 9950 up 52. Noon Beef is expected to be lower. The latest CME Feeder Index was 9767 up 44. We expect that Index to rise 99 points to the 9866 area.

Cash Fed cattle are priced at 133 & 83 North & 84 South. The South should trade at a premium to the North now for several weeks as Calf Feds are ample in the North.

We remain neutral to Bearish cash into July but are not interested in trading live Cattle futures from the short side. In spreads we like long out LC and short Febs. Later on we may choose to Buy Aug LC & sell Dec & Feb. WE are not ready to do that just yet. We still like short Oct Feeders 99-100 for a trade even though when you sell feeders it feels like you are taking on the rest of the world.

Grains Update by Darrell Holaday

Below these comments is an evaluation of the corn in Illinois after looking at corn in Illinois on Saturday.

The market has been lower throughout the day with liquidation across the board ahead of USDAs reports out tomorrow.

The oil market has been higher but the corn market has been unable to follow it higher. A stronger dollar has put some pressure on the market, but the real pressure is the result of non threatening weather in the next seven days. In addition, the wheat harvest has progressed rapidly and yields are getting much better and that has pressured wheat today.

It would not be surprising to see some improvement into the close ahead of the USDA reports tomorrow morning.

At mid-day corn is down .04 (after being down .08), soybeans are up .12 on old crop and down .06 on new crop, wheat is down .06.

Illinois Corn Evaluation

This past Saturday I spent the day looking at corn in Illinois. I did this because I felt that central and southern Illinois and on into Indiana may be critical areas in determining the US corn yield. I knew it went in late and I wanted to see how that are was progressing in order to understand the impact of the weather conditions in the Corn Belt the next 30 days. To the northwest of Illinois the crop is well ahead of schedule and weather conditions over the next 10 days look favorable. Therefore, the extremely good condition of that crop really cannot be questioned and two weeks of favorable will make it difficult for that crop to falter. Therefore, Illinois will be a critical state to evaluate.

Western Illinois:

I started in Hannibal (Mo) and work through western Illinois. The only corn that I saw all day that was full tasseled was within 1 mile of the Mississippi River after crossing at Hannibal. These are my observations of Western Illinois (west of Peoria to the River)

20% of corn is very close to or at normal development and it is very good condition

40% of the corn is 2-3 weeks behind schedule and in good condition

40% of the crop is way behind (currently 18 30 inches tall) and with average condition

Generally if you looked at the crop in that region you would rate 50% of the crop good to excellent until you looked at the calendar and realizes it is June 28.

It was very interesting to me that generally all the corn has very good stand and populations. No matter what the size of the corn in the fields they were generally even stands with no significant drowned out issues. It simply looks as though producers planted when they could and did not push it. There are at least 4 planting windows that show up in the crop in that region.

15-20% of the crop is currently 18-26 inches tall. Stands are good but that is a lot of acreage that has a long way to go.

The poor ground really shows up on a year like this. When you went through the pockets of poor thin ground, the corn really showed the problems this year. It went in late and the growth has been slow and these are the only areas that I saw poor corn in that region.

Central Illinois (north of Peoria)

As you move north (I went up to 10 miles south of I-80 and headed east) the crop becomes less developed generally, but remains very even with good stands.

40-60% of the corn is 24-26 inches tall.

Once again there is about 15-20% of the corn that is normal development and is 42-54 inches tall and is in very good condition.

Similar to Western Illinois but a lot more less developed corn. Seems as though there were 3 planting windows.

As you move east the corn gradually becomes much more variable with substantial extremes from corn just a week from tasselling to corn that is 18 inches tall (just across the road from each other).

Eastern Illinois

This an area that is traditionally has very solid production of corn in the state of Illinois. I went through Ford, Mclean, Piatt, Champagne, Dewitt, Peoria, Iroquois, Livingston, Kankakee counties.

This crop was extremely variable and even the more developed corn has a lot of problems. This is the region that you notice large amounts of drowned out spots and uneven corn in the field.

About 20% of the corn got it in time, but there were very heavy rains after that and a lot corn was drowned out and had to be replanted (or should have been).

Population levels are not what was desired by producers on earlier planted corn.

The later planted corn (the other 80%), is also in mixed condition. There a lot of drowned out corn in the later developed corn and has not had good growing conditions. Ironically, there are actually areas of the region that could actually use rain because the recent heat has actually baked the ground of the small corn and it has turned hard. The crop has not rooted down properly in those areas. They definitely needed the heat, but now they need some cooler temperatures and a shower.

There are parts of the regions that are in very good shape. But I did not go through any county of this group that was impressive. I might go through 5 miles of good looking corn in a county, but then it would drop off substantially for quiet awhile.

The producers in this area fought a tough fight trying to get corn in the ground and get a decent stand.

South Central Illinois

As move into areas south of Peoria, there is less variability and there is more corn that is as normal development (As much as 30% in areas).

There is still 25% of the crop that is 14-24 inches tall.

There are less drowned out spots as compared to Eastern Illinois and the stands are better.

The variability is from one field to the other. Just west of Assumption IL, I observed a field that was just beginning to tassel (most mature corn I had seen since just east of Hannibal) and it was very good corn. Just across the road were two fields of 26 inch tall corn.

As you move southwest toward St Louis the corn generally gets more mature on average. There is still corn that is 3-4 weeks behind, but the average maturity increases.

General Observations

I was very surprised by the large number of acres of corn that is in the ground that is not 20 inches tall. Shocked that did not go to soybeans.

My gut tells me that a lot of acres did go to soybeans, but that is very difficult to analyze. I am simply saying that I am surprised that more did not go to soybeans given the extreme lateness of the crop.

I was surprised that I did not see the situation improve as I went north. The crop is well behind schedule all the way to I-80.

Summary Observations

The crop is in worse condition that I expected when I left on Friday.

It is important to tell you that my experience tells me that generally people underestimate Illinoiss ability to produce corn in good years and bad years. Keep that in perspective when reading the rest of the summary.

When I say that the crop has a long way to go I am not referring to heat units or freeze. Because my bet is neither will come into play in central Illinois as they have a long growing season. They will need it all, but they can make it.

What I do mean by they have a long way to go is that they will need a lot of favorable weather between now and August 30 to make it work. Even then, I believe that 20-25% of the central Illinois crop will be no better than 75% of trend yield even with ideal conditions.

Although the next 10 days looks favorable, it can get too hot for that late corn. When I was there on Saturday, the high was 97 degrees and that small corn was showing it as the ground is exposed and it has not rooted down to the nitrogen and the sub soil moisture.

Needless to say, a large amount of pollination will not occur in that areas until July 20 and will likely last until August 15 for the late corn.

I feel there is a good chance that Illinois corn ratings will drop in the next couple of weeks despite favorable weather conditions.

Do not think there is no corn that is good to excellent in Illinois. There is a small percent that very good and is on pace with normal to above normal development. It is just a very small amount in middle part of Illinois ( I would say less than 15%).

The amount of real late corn is definitely the surprise.

What does this mean for price?

Obviously USDA will update us on Tuesday in regard to their acreage numbers. Once that is out of the way, I think the market will begin to trade conditions. What this trip told me is that there is a long way to go with this crop. It will definitely not be determined in the next two weeks. It will in the northwest Corn Belt, but not in the central and east.

This trip generally makes me believe that I do not want to be short corn at these price levels for a little while. This may be a very good time to buy some corn call options that we would like to have for pricing corn later. Illinois and Indiana need perfect weather and they can get it. They need periods of warmth and continued moisture through mid-August. Remember also that this is a discussion regarding the ability to produce the corn, in other words supply. But the demand side of the equation will play a major role in the price of corn and the overall price of oil will continue to impact corn prices dramatically.

I simply think that despite the favorable weather conditions in the near term, the fact that Illinois needs a lot of TLC over the next 30 days may result in a weather scare that will spark some buying.